Record Highs For Hong Kong Hotels | Deloitte Reports

8th Mar 2005

The year of the rooster began with exciting news for hoteliers in Hong Kong. According to the Hong Kong Tourism Board (HKTB) 2004 was a record-breaking year for tourism arrivals, which reached 21.8m. Results from the China edition of the HotelBenchmark Survey by Deloitte also showed that Hong Kong hotels achieved fantastic results during the year. Year-end 2004 revenue per available room (revPAR) reached their highest since 2000, finishing the year at US$114.Tourist arrivals soar

Recent results for 2004 from the HKTB show that tourist arrivals to Hong Kong shot up by more than 40% compared to the prior year. As the city was badly affected by SARS in the second quarter of 2003 it is not surprising that growth was so impressive. However, arrivals in 2004 outperformed the previous annual record set in 2002 of 16.5m by 30%.

Mainland China remains Hong Kong’s largest source market, accounting for 56% of all tourist arrivals in 2004. One of the major factors pushing arrivals up was the extension of the Individual Visitor Scheme (IVS) during the first half of the year to all 21 cities in the Guangdong province. The scheme started on 28 July 2003, allowing travellers from mainland China to visit Hong Kong on an individual basis. Prior to the scheme, residents could only travel to Hong Kong on a business visa or in group tours.

Visitors from many other source markets also recorded outstanding results in 2004. UK arrivals reached their highest levels since 1996, the year before Britain handed Hong Kong back to China. The increased use of marketing campaigns, including the popular “Hong Kong - Live it, Love it!” has also continued to attract foreign visitors to the city.

Mickey Mouse arrives

The continual roll out of promotional campaigns by the HKTB will inevitably continue to attract tourists into the city. However, there are a number of key development projects currently underway that should lead to a further increase in 2005. For the business traveller, the opening of AsiaWorld-Expo adjacent to Hong Kong International Airport will create an alternative venue for meetings, conventions, exhibitions and events. Due to open in December 2005, the centre will offer more than 70,000 square metres of rental space and accommodate 13,500 people in its largest multi-purpose hall.

For those who like the great outdoors, the Hong Kong Wetland Park, covering 64-hectares alongside the Mai Po Inner Deep Bay Ramsar site will display the city’s wetland ecosystem. Also due to open in December 2005, the park will serve not only as a recreational venue, but provide a themed educational experience with a visitor centre and outdoor exhibits.

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Finally, for those who are young or just young at heart, Mickey Mouse and friends will arrive in September 2005 when Hong Kong’s Disneyland theme park opens its gates. Located on Lantau Island and with construction costs in excess of US$1.8billion, the park will offer two Disney themed hotels, The Hong Kong Disneyland Hotel and Disney’s Hollywood Hotel.Record highs

The graph below shows the key hotel performance indicators for Hong Kong between January 2000 and December 2004. This is shown on a rolling-12 basis to mitigate the impact of seasonality. Although occupancy plummeted in 2003, when the city was affected by SARS, average room rates remained relatively stable. Average room rates dropped only US$3 for the year compared to 2002. Occupancy in the city continued to fall until early 2004 when it made a strong recovery and ended the year at 83.4%. This was the best occupancy level recorded since the HotelBenchmark Survey started reporting on the city in 2000. Average room rate and revPAR also achieved record results in 2004 at US$136 and US$114 respectively. As new supply enters the city in 2005, it will be interesting to see whether the market will continue along this impressive path.

Rolling-12 analysis of the Hong Kong hotel market - January 2000 to December 2004Under development

In addition to the two hotels opening alongside Hong Kong Disneyland with 1,000-rooms between them, there are several other hotel developments currently underway. Four Seasons will make its debut towards the end of the year, with the opening of the 396-room Four Seasons Hong Kong. The hotel will overlook Victoria Harbour and the central business district - forming part of the International Finance Centre complex.

Hong Kong is home to Mandarin Oriental’s flagship hotel which has just announced a US$110m renovation programme due to start in December 2005. Phased over a period of 19 months, the renovation will reduce the existing number of rooms from 541 to 515 but increase the number of suites from 55 to 75. While the flagship hotel undergoes this extensive renovation, the group is scheduled to open a 118-room hotel in the second quarter of 2005. The new Landmark Mandarin Oriental, owned and being built by Hong Kong Land Company will be located on Hong Kong Island.

Encouraging outlook

Whether these new additions to hotel supply will compromise occupancy levels remains to be seen. However, following the record breaking number of tourist arrivals to the city in 2004, coupled with the opening of Hong Kong Disneyland, the future for the hotel industry looks positive. If the city is able to maintain the strong occupancy achieved in 2004, then it may be able to increase average room rates even further.——-